Stock recovery in Europe led by tech; dollar slips: markets wrap

European stocks bounced back from their biggest decline in six weeks as Treasury yields steadied a day before a key American inflation reading.

Technology stocks led the advance in the Stoxx Europe 600 Index after the tech-heavy Nasdaq 100 recovered on Monday following four negative sessions. US futures edged higher. Benchmark Treasury yields stabilised near 1.75% after reaching 1.8% in intraday trading Monday.

The moves reversed days of selling of pricey tech and high-growth stocks driven by bets the Federal Reserve will speed up the pace of monetary tightening. Wednesday’s report on US consumer-price inflation is set to be a further call to action for policy makers, with the rate anticipated to have increased further in December to 7.1%, the fastest pace in almost four decades.

“It’s very well embedded now that inflation in many parts of the world won’t be transitory, that there still are some supply-chain issues that will linger,” Kerry Craig, JPMorgan Asset Management global market strategist, said on Bloomberg Television. “That does mean central banks are pretty keen to get onto the tightening path.”

Swaps indicate the Fed’s target will be 88 basis points higher by the end of this year — seen by many as a sign the market is baking in three hikes, plus the possibility of a fourth — and momentum is building for the first increase to take place as soon as March.

Federal Reserve Chair Jerome Powell said the US economy was expanding at a fast pace and the central bank will prevent higher inflation from becoming entrenched. In remarks for his Senate confirmation hearing, he also cautioned that the post-pandemic economy might look different than the previous expansion.

Meanwhile, Covid-19 is ushering in fresh restrictions in China and Hong Kong, while Japan is extending its border measures until the end of February. Pfizer Inc. is developing a hybrid vaccine that shields against the omicron variant. A new study showed high levels of protective immune cells that fight some common colds also made people less likely to contract Covid-19.

Elsewhere, Bitcoin recovered to around $42 000 after dipping below $40 000, putting it on track for its worst start to a year since the earliest days of digital currencies. Oil edged up.

The world’s most important base-metals exchange resumed trading after a more-than five hour halt, although some brokers reported patchy access to electronic systems as the European trading day got underway.

Here are some key events this week:

• Fed Chair Jerome Powell’s confirmation hearing in the Senate Banking Committee on Tuesday.
• Kansas City Fed President Esther George and St. Louis Fed President James Bullard speak on Tuesday.
• EIA crude oil inventory report on Wednesday.
• China PPI, CPI on Wednesday.
• US CPI, Fed Beige Book on Wednesday.
• US initial jobless claims, PPI on Thursday.
• US Senate Banking Committee hearing for Lael Brainard, nominated as Fed vice-chair on Thursday.
• Richmond Fed President Thomas Barkin, Philadelphia Fed President Patrick Harker,
• Chicago Fed President Charles Evans speak on Thursday.
• Bank of Korea policy decision and briefing on Friday.
• Wells Fargo, Citigroup, JPMorgan due to report earnings on Friday.
• US business inventories, industrial production, University of Michigan consumer sentiment, retail sales on Friday.
• New York Fed President John Williams speaks Friday.

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 rose 0.8% as of 9:04 a.m. London time
• Futures on the S&P 500 rose 0.2%
• Futures on the Nasdaq 100 were little changed
• Futures on the Dow Jones Industrial Average rose 0.2%
• The MSCI Asia Pacific Index fell 0.1%
• The MSCI Emerging Markets Index rose 0.5%

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%
• The euro rose 0.2% to $1.1347
• The Japanese yen fell 0.2% to 115.41 per dollar
• The offshore yuan was little changed at 6.3788 per dollar
• The British pound rose 0.3% to $1.3611

Bonds

• The yield on 10-year Treasuries was little changed at 1.75%
• Germany’s 10-year yield was little changed at -0.04%
• Britain’s 10-year yield declined one basis point to 1.18%

Commodities

• Brent crude rose 1% to $81.68 a barrel
• Spot gold rose 0.4% to $1 808.71 an ounce